White House Calls For Raising Minimum Wage For Tipped Workers

While the federal minimum wage for hourly workers has increased from $4.25/hour in 1991 to the present level of $7.25, the minimum wage for workers earning tips has remained at $2.13, meaning tipped workers have had to increasingly rely on tips because their base wage has not kept up with the rest of the workforce. This morning, the White House made the case that it’s time for tipped workers to get a pay raise.

In a report [PDF] prepared by the National Economic Council, the Council of Economic Advisers, the Domestic Policy Council, and the Department of Labor, the White House points out that since 1991, when the tipped wage was last set for employers, the real value of that pay has declined by 40%.

This map shows how different states treat tipped employees. States in blue and green pay tipped employees higher than the federal minimum level of $2.13. Click for full-size image.

WORTH LESS
When that level was set in the early days of grunge music, $2.13/hour was more than half the minimum hourly wage. Because that base number has not increased, it is now only 29% of the current minimum wage of $7.25. This is the lowest percentage since the tipped minimum wage was established in 1966.

Since 32 states and Washington, D.C., have taken it upon themselves to mandate tipped minimum wages higher than the federal minimum, the report argues that it’s time for the federal standard to be brought into the 21st century.

THE PROPOSAL
The President has already called on lawmakers to raise the minimum wage for all workers to $10.10, and then tying that wage level to inflation so that it’s no longer a legislative matter. For tipped employees, the White House suggests increasing the minimum wage to $4.90/hour by 2016, and then eventually setting it at 70% of the full wage level.

This graph from the report shows that women significantly outnumber men in the tipped-employee workforce. Click for full-size image.

THE GENDER GAP
Given that women outnumber men by nearly three to one in the tipped-employee workforce, and that average hourly wages for workers in tipped occupations are nearly 40% lower than overall average hourly wages, the White House contends that a boost to wages paid to tipped employees could help to narrow the pay gap between men and women.

Given that the restaurant industry would be the one most directly impacted by the wage increase, we’ve reached out to the National Restaurant Association for comment on the White House report. If we hear anything back, we’ll update you.